Mayor threatens court order

Hannemann tells the governor that the state needs to collect the new tax surcharge

A dispute over whether the city or the state should collect a 0.5 percent general excise tax surcharge could end up in court, possibly derailing a mass transit project for Oahu.

In a letter sent yesterday to Gov. Linda Lingle, Mayor Mufi Hannemann threatened to seek a court order to have the state Department of Taxation collect the taxes if it refused to do so.

The three-page letter asks Attorney General Mark Bennett's office to give a legal explanation by Friday as to why the state would not be able to collect the taxes beginning Jan. 1.

"We really need to know from the state, why can't they follow through and obey the law?" Hannemann said.

Bennett, who is in California, said he could not comment on the letter until he returned to Hawaii on Tuesday. Tax Director Kurt Kawafuchi did not return calls seeking comment.

The governor and the mayor have been sniping at each other for months over the collection of the tax.

Lingle maintains that the Tax Department cannot collect the taxes because the Legislature did not approve funds to pay for the extra costs. She was on Maui yesterday and would review the letter, said her spokesman, Russell Pang.

But Hannemann said a computer vendor with the Tax Department needs to sign a contract by July 1 to be able to collect the taxes next year.

"Any delay in the collection of the county surcharge on state tax would result in the delay of the city's planned mass transit project," the mayor wrote in the letter. "Such delay may also jeopardize federal funding."

Last year, lawmakers gave the city the authority to levy the new tax for city transit projects, but it also designated that the state should collect the tax. The new county surcharge would add 0.5 percent for Honolulu to the 4 percent general excise tax being paid statewide.

Lingle tried unsuccessfully this past session to get the law changed so that the city would collect the tax.

Funding to assist the state Tax Department to prepare to collect the tax was nixed in the final days of the legislative session.

Lingle said she would consider a request from legislative leaders to go back into a special session to fix the problem.

The mayor said he is also open to having lawmakers reconvene.

"I also asked them, Do they have any other ideas to remedy this situation?" Hannemann said.